Happiness Investment Network, March 22 - In Asian markets on Monday (March 22), the U.S. dollar index maintained an uptrend. Currently trading above the 92 mark, it once hit the 92.15 level before; spot gold has maintained a downward trend, and the gold price It fell below the 1,740 US dollar/ounce mark, and earlier the price of gold fell sharply to close to 1,730 US dollars/ounce. The Turkish central bank governor was suddenly replaced over the weekend, which caused the Turkish lira to collapse against the US dollar by nearly 15% in early trading. The news also supported the trend of the US dollar and suppressed the price of gold.
Turkey's central bank governor was suddenly replaced, and the Turkish lira plummeted by nearly 15%
After the Asian market opened on Monday, the Turkish lira plunged against the U.S. dollar. The exchange rate of the Turkish lira to the U.S. dollar fell below 8 to 1, which was the first time since November last year. Analysts said that the dismissal of the former governor of Turkey's central bank Abar was the main reason for the lira's plunge.
In the early morning of March 20, local time, the Turkish government issued an official announcement signed by President Tayyip Erdogan, announcing the appointment of Kafcioglu as the new governor of the Turkish Central Bank and the dismissal of former governor Abbar. At this time, it has just been 4 months since Abar took office.
Abar’s dismissal is believed to be related to the Turkish Central Bank’s interest rate hike on March 18. On the same day, the Central Bank of Turkey announced that it would raise the benchmark interest rate from 17% to 19%.
In fact, since Abar took office in November last year, in order to fight inflation, the Central Bank of Turkey has raised interest rates many times, and the benchmark interest rate has been raised by 875 basis points. In November last year, Turkey's benchmark interest rate was raised from 10.25% to 15%, and then it was raised to 17% in December.
According to a Reuters report on Monday, Turkish President Recep Tayyip Erdogan replaced the hawkish central bank governor with a person critical of high interest rates last weekend, shocking investors. After that, the lira exchange rate against the U.S. dollar fell to a record low.
The yen has appreciated against the euro and other currencies due to market speculation that Japanese individual investors who recently bought the lira due to high interest rates will be forced to reduce their losses and close their positions.
Concerns that the Turkish incident will cause turbulence in other financial markets also support the U.S. dollar, because the U.S. dollar is a safe haven currency.
Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo, said: “The situation in other emerging market countries is different from Turkey, but it is still likely to spread. People are worried that investors will start to profit in other markets. Now it seems to be rethinking investment strategies. The time has come, because the trend towards high-yielding emerging market currencies will be put on hold."
Prior to this, the lira became the best carry currency this year, and fund managers praised Abar’s actions to raise interest rates and curb inflation.
Coex Partners Ltd. Analyst Henrik Gullberg said that this is the source of bullish optimism because the central bank of Turkey is allowed to maintain high interest rates for a period of time.
Gullberg had previously expected the lira to rise above 6.90 lira to the dollar. He said, "now ruined", it will be difficult to find a long Lira.
An analyst at Brown Brothers Harriman (BBH) said: “After a series of aggressive interest rate hikes to regain investor confidence, Turkey suffered a defeat on the verge of victory.”
In Asian markets on Monday, the Turkish lira traded at around 8.10 against the US dollar, down 11% from Friday's close.
After the Asian market opened on Monday, the Turkish lira plunged 14.9% against the US dollar to 8.4850, close to a record low of 8.5800.
Asian markets have weaker liquidity in the early trading, but analysts said that as more investors enter the market at a later date, they are ready for greater volatility.
A foreign exchange trader who knows the status of the transaction revealed that the Turkish lira suffered a massive sell-off when liquidity was thin in the early morning hours in Asia, and this sell-off overwhelmed the support of the state-owned bank for the exchange rate of the lira.
Turkish President Erdogan said earlier this year that he was totally opposed to high interest rates and that high interest rates would not allow the country to develop.
Analysts said that the new central bank governor may mean that the hawkish and orthodox measures taken to fight inflation will be reversed, which may lead to long-term market turmoil.
Kavcioglu, the new governor of the Turkish Central Bank, promised on March 21 that he would effectively use policy tools to stabilize prices. He said that the central bank's interest rate decision-making meeting will be held on a regular schedule.
Kafcioglu was born in 1967. He graduated from September 9 University in Izmir, Turkey, and obtained his master's and doctorate degrees from Marmara University.
The price of gold fell below the 1740 mark, Powell's speeches intensively hit this week
Some analysts pointed out that the price of gold fell below the US$1,740/oz mark in Asia on Monday, and once approached US$1,730/oz. The reason was that the Turkish central bank governor’s sudden withdrawal caused investors to flock to the US dollar for safe haven, fearing that Turkey’s move may affect others. Financial market.
Analysts pointed out that Turkish President Erdogan unexpectedly removed the governor of the hawkish central bank last Saturday and appointed a critic of high interest rates as the new governor. The decision was shocking. Concerns that Turkey’s move may threaten other financial markets support the US dollar, making gold more expensive for holders of non-US dollar currencies.
In the Asian market on Monday, the US dollar index rebounded to 92.15, and the gold price dropped sharply to US$1,732.35 per ounce. At present, the gold price is trading at around US$1738 per ounce, which is about US$7 lower than the closing price on Friday.
The well-known financial website Economies.com wrote an article that the price of gold tried to break through $1739.50 per ounce, but failed to stay above this level. At present, the price of gold is still trapped between the resistance of $1739.50 per ounce and the support of $1725.00 per ounce.
According to Economies.com, if the price of gold falls below the support of US$1725.00 per ounce, this will put the price of gold under bearish pressure, and the next main target is US$1692.00 per ounce. Economies.com added that, on the other hand, if the price of gold breaks through $1739.50 per ounce and stays above this level, it will push the price of gold to rise further. The first target is at $1765.00 per ounce, and the higher target is at $1800.00 per ounce. .
This week, Fed Chairman Powell will bring a large number of Fed officials on stage, among which Powell has at least three public appearances.
On Monday, Fed Chairman Powell will speak at the Bank for International Settlements meeting on innovation in the digital age. On Tuesday, Powell will testify with U.S. Treasury Secretary Yellen before the House Financial Services Committee. On Wednesday, Powell will attend the Senate Banking Committee hearing.
Although the Fed is expected to remain extremely patient as the US economy recovers, the gold market still needs to deal with rising bond yields.
Fed Chairman Powell recently stated that he is not worried about the recent bond market sell-off, which has pushed yields to a 13-month high of more than 1.7%.
The Fed sharply raised its expectations for economic growth last Wednesday, but at the same time said that although the economic outlook has improved and the inflation rate has risen this year, it is not expected to raise interest rates until 2023.
Powell last Wednesday reiterated his commitment to maintain interest rates close to zero in order to maintain the normal track of economic recovery, even if the inflation rate this year exceeds the 2% target.
For many investors, the rise in bond yields is the biggest challenge facing the gold market, and bond yields are also supporting the U.S. dollar.
Bob Haberkorn, senior market strategist at RJO Futures, said: "Powell's remarks on interest rates are very supportive of gold, but on the other hand, the fact that 10-year yields continue to rise limits any upside for gold."
GoldCore's marketing director David Russell said that the Fed said last Wednesday that the extremely loose monetary policy will continue until 2023, and this statement strongly supports gold.
Colin Cieszynski, chief market strategist at SIA Wealth Management, has recently been bearish on gold, but he added that there is still room for gold prices to rise in this revised rebound.
Ole Hansen, head of commodities strategy at Saxo Bank, said he has a neutral view on gold recently, but he hopes that the price of gold will only start to rise after it breaks through $1,765.
